Pension benefits extended to common-law spouses

The so-called Carrigan amendments to the Pension Benefits Act recently became law, highlighting the need to update estate plans after separation, and also providing an example of provincial government processes working properly, says Toronto family lawyer Brian Ludmer.

The Ontario Court of Appeal’s 2012 decision in Carrigan v. Carrigan Estate, 2012 ONCA 823 (CanLII) disentitled common-law spouses to pre-retirement death benefits if the deceased individual had previously been married and was separated, but not divorced from the previous spouse, reports the Financial Post. Instead, the member’s named beneficiary was entitled to the benefit, the article says.

Changes to the act now clarify that in circumstances where a pension plan member is legally married to a spouse they’re separated from, but living with a new common-law spouse and dies before retirement, the common-law spouse will be entitled to the death benefit.

While it’s positive that the gap in legislation was identified and addressed, Ludmer, says the case reinforces the need for detailed estate plans.

“Family breakdown is just one of many events that should prompt people to say it’s stop, look and listen time – we need to refresh financial plans and estate plans,” says Ludmer, of LudmerLaw. “It could be an illness, the birth of a grandchild … any number of things could happen where people need to dust off their will and estate plan and take a fresh look.”

It’s common practice at law firms to recommend that new clients going through a separation examine who their designated beneficiary is, and whether the name should be changed, says Ludmer.

“That’s just a good standard to have,” he says. “You need to sit down and take a look at everything, including what you’re providing for your kids. When you start up another relationship you’re going to want to have finished dealing with the financial impact of ending your previous relationship.”

Ludmer says “financial planning and estate planning is not something you do once and then set it down and say it’s done.” The whole idea, he says, is for the plans to shift, based on a number of factors.

Carrigan is also useful in highlighting the different roles of the courts and the government, says Ludmer.

“The job of the court is to apply the legislation, and if a gap exists on something that given the evolution of time doesn’t make sense anymore, that’s the role of the legislature to correct it,” he says. “You can see here that this was moved along fairly quickly. People thought the statute meant one thing, but it was something else, and the government moved quickly to correct it. This is the way the justice system should work.”